Exam 7: Activity-Based Costing and Management

Increasing the efficiency of necessary activities by using economies of scale is known as

A work distribution matrix is derived from an interview or a written survey.

Product diversity means that products consume overhead activities in systematically different proportions.

Figure 7-2. Steller Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small,frequent orders and the non-JIT distributor tends to place larger,less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are found below: Refer to Figure 7-2.Calculate the total customer cost for the non-JIT distributor.

An activity-based costing system first assigns costs to activities and then to cost objects.

Setups,material handling,and inspection are all possible examples of

Quality improvement can increase profitability by decreasing costs.

Producing 10,000 units of a cell phone requires $300,000 of prime costs,uses 2,000 machine hours,and takes 1,200 setup hours.The activity rates are $40 per machine hour and $100 per setup hour.What is the unit cost of a cell phone?

A factory produces 124,000 televisions per quarter.A total of 8,000 production hours are used within the factory per quarter.Calculate the cycle time in minutes.

A company will sometimes use a ____________________ which identifies the amount of labor consumed by each activity.

Costs that are caused by the inefficient performance of value-added activities are value added costs.

____ costs in many firms represent a much higher percentage of product costs than direct labor.

Figure 7-6. Xander Company produces televisions.One of its plants produces two versions of televisions: a basic model and a premium model.At the beginning of the year,the following data were prepared for the plant: Additionally,the following overhead activity costs are reported: Xander uses activity-based costing to calculate product cost. Refer to Figure 7-6.

When a new product can be designed to use components already being used by other products this is known as ________________.

A company was evaluating the activity-based environmental cost of two different products - Product X and Product Y.Information on two environmental activities is as follows: Data on Product X and Product Y follows:

____ can help a company become more competitive by providing more accurate cost data.

A focus on cost reduction instead of cost assignment and emphasizing the maximization of systemwide performance is known as _______________________.

Figure 7-4. Honeydew Company produces two products,a high end laptop computer under the label Bunsen Laptops,and an inexpensive desktop computer under the label Beaker Computers.The two products use two overhead activities,with the following costs: The controller has collected the expected annual prime costs for each product,the machine hours,the setup hours,and the expected production. Refer to Figure 7-4.Calculate the overhead cost per unit for each Beaker Computer,using overhead rates based on machine hours and setup hours.

Flynn Company has a JIT system in place.Each manufacturing cell is dedicated to the production of a single product or major subassembly.One cell,dedicated to the production of guitar pickups,has four operations: machining,finishing,assembly,and testing. For the coming year,the pickup cell has the following budgeted costs and cell time (both at theoretical capacity): During the year,the following actual results were obtained:

Figure 7-3. Hamilton Company manufactures engines.Hamilton produces all the parts necessary for its engines except for one electronic component,which is purchased from two local suppliers: Traynor Inc.and Bello Company.Both suppliers are reliable and rarely deliver late; however,Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95.Hamilton purchases 70 percent of its components from Bello,because of the lower price.The total annual demand is 75,000 units. Refer to Figure 7-3.Suppose that Hamilton loses $2,500,000 in sales per year because of its reputation for defective units attributable to failed components.Using warranty hours,assign the proportional cost of lost sales to Traynor Inc.Then determine what effect this would have on the cost per component.